Learning to Let Go

Did we really believe the markets would go straight up forever? In investors' minds, was there ever a chance the markets could have a couple of down days? Of course not. But when your portfolio is one-sided and you enter the fray toward the end of a nice run, well, any down session is likely to give you an upset stomach.

As I've mentioned here many times, there are a million reasons to sell but there's only one reason to buy. Perhaps the excuse you needed was the release of those Federal Reserve minutes Wednesday, or some other news that hit on that day or the next. I can tell you this much -- if you did unload, you probably missed your chance to make nice gains Friday.

We could be in for more rocky days over the coming weeks and months, especially if the data from the U.S. and abroad are not in synch with improving economies. Could this week be a precursor of things to come, with higher volatility? Certainly that could be the case, but we'll let the market tell us how to proceed and refrain from making any predictions on the outcome. The CBOE Volatility Index (VIX) virtually wiped out the recent complacency with one brush, so we'll be on watch for a shift in this trend.

These days, the market moves are fast and punishing if you miss them. As a trend trader, I'm much more comfortable staying on a trend that I see as long-lasting, accepting the occasional countertrend days and just going with the momentum side. So a couple of down days may not signal a change in trend, but I'll be on guard for a shift.

At the same time, I'm not complacent enough to believe profits should just evaporate. As a wise man once told me, "We are in the moving business, not the storage business." This game of trading is about booking profits and preserving capital -- period. If you want to stick around for the long haul, you have be able to quickly take a gain off the table, or even cut bait on a loser.

Selling is the most liberating experience. When you free up your mind and body from a trade, it allows you to move forward and not live in the past. Still, we often find our ego gets in the way, and that it limits our trading success. The best advice I can give is this: Lose that ego. Take what you've earned, and move along to the next trade.

Remember, we must not fall in love with companies, stocks or trades. They are simply a means with which to build wealth if our timing is right.

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